Closing Bell - Closing Bell: Stocks surge into the close, Activist Investor Jeff Smith on where he sees value in the market, and Nikola keeps on truckin’ 3/29/22

Episode Date: March 29, 2022

The Dow & S&P 500 rallying for a third straight day. Truist Advisory Services Co-Chief Investment Officer Keither Lerner discusses whether stocks can keep rallying despite the bond market flashing a recession signal. Starboard Value CEO Jeff Smith explains where he sees value in this market and discusses the takeover bid for retailer Kohl’s that he is backing. Nikola CEO Mark Russell on how much demand he is seeing for the company’s electric truck and why the supply chain challenge is the biggest he’s ever seen.

Thank you, Tyler and Kelly. Stocks are higher again, up 1% on the S&P, and the two-year, 10-year spread is about to invert. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. We've got a great show coming your way, including an exclusive interview with Starboard Value CEO Jeff Smith in just a few moments. Plus, we'll talk to the CEO of Nikola in his first interview since announcing the start of production for Nikola's electric trucks. That stock is up 40 percent in the past month. But first, here's a look at where things stand in the market.

One percent gain for the S&P 500. We are going strong nearing the end of March with a more than five and a half percent gain for this market. The Nasdaq is in the lead again, 1.7 percent higher. Big cap tech leads the way. And today we get confirmation from the small cap, 1.7% higher. Big cap tech leads the way. And today, we get confirmation from the small cap, something that we have not seen lately, up 2.5% for the Russell 2000. The Dow is lagging up three quarters of 1%. Right now, it's up about 254 points. The high of the day was up more than 400. Here are my top takeaways on

some big stories today. Robinhood spiking after extending the hours that will let users trade to between 7 a.m. and 8 p.m. Meme trading is back, too, and that's great for Robinhood. Just this week, AMC is up almost 50 percent. GameStop up 25 percent. But the key for Robinhood, it needs to prove it can do well when stocks are in a bear market, too, not just when they're up and not just when AMC and GameStop are going to the moon, because that wasn't the case earlier this year, and Robinhood's trading activity ground to a halt and the stock got slammed. UnitedHealth spending $5.4 billion to buy LHC Group. It's the latest

major insurer going deeper into home health. Think hospices or at-home nurses and health aides. It's a growing trend as it's considered a lower cost alternative to nursing homes and hospital stays. And with an aging population, it is all about finding lower cost solutions. COVID also may have boosted demand for home health. Watch the competitors in the space. Amedisys and Kemed. It is a major trend. And rising gas prices get all the headlines and the hand-wringing, but rising food prices are likely to be more painful for household budgets. For Americans in the lowest income group, food expenditures account for 11% of overall spending, according to new research from Wolf, 7% for high-income earners. Gas, on the other hand, only 2% to 3% of spending across the board. Politicians and investors worried about consumers should pay more attention to food. Now let's get straight to our big guest

this hour, Starboard Value CEO, Jeff Smith. Jeff, welcome. Good to have you on the show. Great to be here, Sarah. Thanks for having me. And we definitely are going to talk some individual stocks and your positions, but have to start with a broad question because we've got this unusual thing happening. The yield curve is about to invert the two tens. The stock market is rallying. Do you see that as a signal of recession? And is that something you see in the companies that you're involved with? Yeah, again, Sarah, great to be here.

Great to be with you. You know, from our standpoint at Starboard, you know, what we look to do is we look to invest in companies that we think are undervalued. You know, the overall macro environment, of course, comes into play, but it comes into play in terms of how we look to analyze companies, how we look to think about their future earnings, how we look to think through the volatility of the potential results of those companies. And, you know, uncertainty creates a larger gap in the variability as it relates to the future prospects of those businesses. Do we have some concerns? Of course we have some concerns.

I always have concerns. We're always looking around corners. So it's a market that we're watching. There's opportunities for us all over the place. When you see stocks with this kind of volatility, we get great opportunities to be able to pounce on companies that we think get thrown down. So from our standpoint, we think it's a good environment, but it's also something that needs to be watched. Is there a sector or part of the market that's seen valuations correct enough that makes it more appealing for you to take your activist stakes? Yeah, I mean, from our standpoint, it's about

being able to predict, again, within a range of outcomes, the top line results and therefore the bottom line results. So companies with highly recurring revenue are ones that we're really attracted to, you know, ones that can sustain shocks. And, you know, it's a natural occurrence with what we do in our business, because when we take a position in companies, you know, it's a natural occurrence with what we do in our business, because when we when we take a position in companies, you know, it's going to cause reactions inside the company. You know, management is going to be focused not just on the business or maybe even more so on the business, but also on what they need to do to improve the business. So they need to be companies that have highly recurring revenue that can sustain catalysts, can sustain someone getting involved. And naturally, what happens with that is it's also companies that can withstand macro shocks usually because they're so insulated and have highly recurring revenue streams. So let's talk Huntsman. That was the,

it's one of your top holdings. You staged a proxy fight for board seats and ended up losing. What happened there from your perspective? Yeah, Sarah, well, first, let's just define winning and losing for a second. So from our standpoint, you know, we're looking to create value for the benefit of all shareholders. And our investors are also looking for us to create value for all shareholders, of which we're usually one of the larger shareholders. So winning and losing for us, as well as for investors and shareholders in Huntsman, is creating value for shareholders. And so since we've been involved in Huntsman, I'm sure you have it up on the screen, stocks up about 50% since we've been involved in Huntsman.

I don't think any investor would consider that a loss. Now, that being said, I'm enormously competitive. So we're not happy about going through a proxy contest and not getting people seated on the board. But it's not just about that. It's about how does a company improve? And when we get involved in companies, the one thing I can tell you for sure, as I mentioned before, management and boards are gonna have more conversations, more conversations about how they can improve their business about what needs to happen.

They're gonna hear from shareholders. So going through a proxy contest has many, many advantages. One of which could be getting people on the board, but it's not the only advantage. The other advantage is that Huntsman, the management team and the board, has heard from shareholders more than it ever heard from shareholders probably in the last, you know, 10-plus years since it's been public. And I think what they heard, what I know they heard, is that what they've been doing isn't good enough.

What they've been doing, you know, they haven't been following through on their promises. And so they've now made new promises, and shareholders are going to hold them accountable, including us. So shareholders, research channels, and I hope the board is going to hold them accountable. Most notably, they mentioned or promised that they're going to sell their textile effects business. They've promised that they're going to improve their operating margins, get them, you know, to 18 to 20 percent or even higher. And, you know, if that happens, there's going to be a lot of value that's created even from here in Huntsman. So from our standpoint, am I happy? No, I don't like losing at anything.

But as a portfolio manager, am I happy? Yeah. We look to create win-win scenarios for ourselves. That's what we do. And where we sit right now, if this company executes, there's going to be a lot of value that's created. And if the company doesn't execute, well, I think the board's going to probably take some action. And if the board doesn't take some action, then shareholders or we can take action later. So you're holding your stake, 8% stake in that company. You're not selling because you exited Box after that fight went the wrong way for you as well. Well, you know, what's interesting, Sarah, is it's not all or none, right? So one of the benefits of not being on the board is that we maintain our trading

flexibility. And that means that we can make a risk-reward decision with our position, just like every other shareholder can make a risk-reward decision with our position, just like every other shareholder can make a risk reward decision with their position. And so that means we can buy, we can sell. And, you know, if stocks continue to appreciate in value, then, you know, we can reduce those positions. If it comes back down, we can buy it again. So Box has performed unbelievably well. You know, from the IPO until our involvement in Box, the stock was down 35%. After our involvement, the stock almost doubled. So, you know, that's fantastic. That's what shareholders want. That's the catalyst that they want us to be. And that's what our investors want us to do for the benefit of those shareholders. So does that mean we need to continue to own it after the stock has doubled? Certainly not

in the same size we had it before. Does that mean that if the stock comes all the way down and they miss their promises, we can always buy back in again and then we can hold them accountable again? I'd be thrilled if we could do that a second time. Jeff, stay with us because we have a lot more to talk about. I want to ask you about the bid for Kohl's, of course, your big stake in GoDaddy and much more. Jeff Smith of Starboard, our special guest. We're going to talk to him on the other side of the break. Just want to point out that we are at session highs. The Nasdaq's up 266 or almost 2 percent as we head into the close with the Dow up 300 points. You're watching Closing Bell on CNBC. Another solid rally on our hands. S&P is up 1.2%.

We're back with Starboard Value CEO Jeff Smith. And Jeff, I wanted to talk to you about some of your new positions, including GoDaddy, which you've taken a big stake in. And you've had some success in the past in this space with Web.com. What's the plan here? Yeah. Look, it is a space, Sarah, that we know really well. It's, you know, we love the space. We love the position with GoDaddy. It's a terrific company.

We've had really a great relationship so far with the company. We're looking forward to continuing to work with them. They just, you know, recently, you know, promised, you know, $8.75 a share, at least in free cash flow per share. And, you know, we think there's more that's available. So from our standpoint, we think it's a company that's undervalued and we think that it's a company that can perform really well. You know, it's got a nice moat around its business. Is that an area ripe for deals? Because that was what happened in the past. I think Web.com was taken private. There have been a number of deals there. Yeah, I don't know if that's the first choice as it relates to it. I think it's a really good company. It's a good company, a good public company. Look, whatever we invest in, we're

looking at companies that are undervalued and undervalued and under earning. So those can be good public companies if they continue to operate really well and improve their operating performance. But, of course, any company that's undervalued and under-earning can also be a target and something that can be acquired. But I don't think that's the first course of action here at GoDaddy. Well, speaking of something that can be acquired, the firm that you back, Acacia, was one of the bidders for Kohl's. Put your hat in the ring there. It's $64. It was rejected as undervaluing the company. But now the company is looking at its options, working with its bankers at Goldman Sachs.

Are you still in the running to buy Kohl's? Do you still think it's a good target? Yeah, Sarah, we really love the Kohl's business. So we have, as you mentioned, we have a partnership with Acacia. And it's a terrific partnership where we look for companies that are undervalued, that have terrific cash flow. And Kohl's is an underappreciated business that has terrific cash flow. And it's a company that we really would love to own. So, you know, I guess that's mostly what I could say about it. But it is a business that we would love to own. So, you know, that's that's I guess that's that's mostly what I could say about it.

But it is it is a business that we would love to own. Got it. I know you can't say much more as there there's a process unfolding. You've also had some big success, Jeff, in the restaurant industry when it comes to turnarounds. Darden, Papa John's. Is that industry at this moment ripe for for activism and for some plays? I know Carl Icahn's in McDonald's, for instance, trying to get better treatment for pork. But is that an area that still interests you? Of course. I mean, I'm still the chair of the board of Papa John's, and it's, you know, I love that. It's a terrific business. It's a great brand, great products. I love the restaurant industry. We love the restaurant industry.

Look, honestly, from our standpoint, just about every industry is an opportunity for us. What we do is we look for companies in each industry, and there's always companies that are the best performers in the industry. And then there's companies that are poor performers in the industry. And then there's companies that are poor performers in the industry. And if the companies that are poor performers in the industry have terrific assets, then that's an opportunity for us to get involved and be a catalyst for change and improve the operational performance of those businesses. So it can be in any industry, but particularly in restaurants, again, yeah, we've had a lot of success in restaurants. You mentioned Darden and Papa John's is honestly, it's been a true joy to work with the company and work with the management team on a really tremendous transformation. So trying to make some news here, I want you to reveal your next target, Jeff. What about SPACs?

Last time we spoke, you were launching a SPAC. You've done one with a data center company, Sixterra. So that's a part of the market that people group in with a lot of the speculative areas, bubbles even, that have popped as the Fed has started raising interest rates with the meme trades and the cryptos. And there have been questions about the quality of these SPACs. What would you say to some of that criticism? Yeah, look, I think SPACs, and I've said this before publicly, SPAC is just an alternative way for a company to go public. And, you know, it was more in vogue. It's now a little less in vogue,

but it's another way for a company to go public. It's really more of a statement about how inefficient the traditional IPO is. And the traditional IPO really needs to be revamped. It's too expensive, it's too inefficient. And the SPAC was a way to go at it. I don't think it's the last way. I think that there just needs to be an evolution as to how companies go public to find the most efficient ways for them to go public. But there are many good companies that have gone public through a merger with a SPAC. Sixterra is one of them. It's a terrific company. It's, again, undervalued compared to its peers. And it has an opportunity to continue its ascent. and it's performed pretty well, one of the better performing D-SPAC companies. And you and I have talked about this before. I don't really know when a company that has finished its merger and is a D-SPAC becomes just a regular public company,

but I would argue that Sixtera at this point is just a regular public company, and we're going to need to move on from those labels because it doesn't really matter how a company goes public once it's a public company. And we're out of time, but just really quickly, Karen Feinerman writing in wants to know, do you think Kohl's is just going through the motions or is it actually going to be pursuing a deal here? Yeah, Sarah, I wish I knew the answer to that. And I don't know that any of us are going to know the answer to that until the end. And by the way, I'm not sure if they know the answer to that. Look, as you know, I've been a board member for lots of companies.

My suspicion is they're running a very real process, and it's going to depend on the outcome as it relates to that process. As a board member, you have to analyze the proposals that come in compared to your risk-adjusted standalone plan. And I'm not sure how they could possibly know what that, or a good board member could possibly know the end result of this until they know what those proposals look like and analyze it against their risk-adjusted plan. Keep us posted on that, Jeff. Thank you.

And all the positions. We appreciate the time. Jeff Smith of Starboard. Just give you a quick check of the markets here because we're going strong again. Visa is actually the biggest contributor to the Dow gains today. And we are seeing those gains accelerate

in this final hour of trade, up 1.86% on the NASDAQ. S&P is up 1.2%. Every sector is positive right now except for energy. Of course, oil is selling off on hopes of a ceasefire or some sort of deal between Russia and Ukraine. Real estate is your best performing sector, along with technology, consumer discretionary and communication services. Check out shares of Nikola. They are significantly higher over the past month, boosted by news that it has begun production of its battery-powered

truck. Finally, coming up, we'll talk to the CEO, Mark Russell, about that news and the impact of rising commodity prices on EV makers. We'll be right back. Welcome back to Closing Bell. Check out some of today's top search tickers on CNBC.com. Ten-year yield holds the top spot. Yields are moving south today, but the big story is that inversion in the two-year, ten-year note yield curve, which is about to occur very close. Tesla's coming in at number two, higher again today. It's been on a very strong hot streak this month. AMC at number three after a huge rally in yesterday's session and keeping it going today. Crude oil next, falling on hopeful signs from Russia-Ukraine peace talks and GameStop, giving a little back, 1.6 percent after a pretty tremendous

rally this week. Apple was number six today on pace for its 11th straight day of gains, longest winning streak since 2003. Shares of EV maker Nikola rallying 20 percent since announcing last week that it has started production of its electric commercial truck. CEO Mark Russell joins us next for an exclusive interview on the outlook for new orders and how part shortages could impact production. We'll be right back. Shares of Nikola have been on a roll since last week when the company announced it has began production of its tray, the battery electric semi truck at its Arizona factory. It does expect to deliver between 300 and 500 trucks this year. And earlier today, the company announced a new partnership with a financing company for sales of Nikola products. Joining us now is today's closer Nikola CEO Mark Russell.

Mark, it's good to have you on the show. Welcome. Thank you. I think the reaction from investors to hearing the news about the truck being in production was, wow, it's finally here and it's a real thing. What are you saying about where you are right now in this journey? We're super excited to be at this inflection point where we've been shooting for being able to produce a truck since we were in the basement years ago. So this is really an important milestone in our growth as a company to be at the point where we can actually start series production last week and have trucks in the hands of our customers starting next month.

So tell us what you are seeing as far as orders and the timeline for those. Well, we have no shortage of demand. Everybody wants and needs zero emission trucks. When we go to customers and we say, hey, we've got a truck that's in production, we think the total cost of ownership of this truck compared to a diesel is going to be competitive. And the response to that is, when can I get one? You know, when can I get started? So that's enabled us to kind of pick and choose our spots in the market. We're launching with customers who are very allied with us and aligned with us in terms of how we want to go into the market. And we're super excited about these launch customers,

and they're super excited about the truck. There's not a shortage of demand of competitive zero-function vehicle out. Mark, I can't help but think of that fake truck demo that got you guys in trouble with the prototype rolling down the hill. Obviously, it's been a huge source of litigation for you. How much work have you had to do to gain the credibility of investors who wonder if it's the real deal this time around? Well, we're focused on hitting those milestones like the start of production.

That's what we want to focus on is going forward, continuing to hit our milestones. So far, we've been able to do pretty much everything we said we would do. And so the question people have about us now is how fast can we scale, especially in the face of the headwinds of supply chain shortages that you see around the world today. You feel like you've won back the trust of the investor community? I know the founder, Trevor Milton, is facing a trial that starts as soon as this week or next, facing fraud charges. That's one of the bridges for us. We're focused on moving forward at this point.

We're so excited to be in production with this truck, to be on track to be in production with our fuel cell hydrogen power truck next year, and to have our hydrogen infrastructure coming in. We think that that potentially has the chance to change the world, to decarbonize one of the hardest sectors of the economy to decarbonize, which is heavy haul, long distance transport. That is extremely difficult to decarbonize. And Nikola has a solution for that, which is, of course, why we have no shortage of demand.

Yeah, the stock is surging again today, 9.5 percent, Mark. So what about the supply chain shortages and the inflation we're seeing in different materials that go into these batteries? Does that set you back at all? How are you dealing with all that? We've been able to go forward in spite of it, but I have to say that it's the biggest supply chain challenge I've seen in my several decades of trying to do stuff like this. I've never seen shortages so pervasive and so acute. It's a really difficult situation, which is why you got to give kudos to our team. We have a great internal supply chain team, world-class, and they are teamed up with some world-class partners. We have world-class partners in the form of partners like Bosch and Echo, people who are really, really good on a global scale, who are helping us deal with this. And that's how we've been able to get parts

to start production of the tray last week and to shoot for producing at least 300 trucks. We think we have enough parts to produce at least 300 trucks this year. We think if we are good and lucky too, we might get up to 500 trucks this year and then we can scale up to multiples of that next year. We're cautiously optimistic about being able to do that.

Well, keep us posted on the progress. Mark Russell, thank you for the update. CEO of Nikola. Thanks. Up another almost 10% now. Here's where we stand in the markets. Rally day again to end up what has been a very strong month for Wall Street. We're up almost 2% now on the Nasdaq. Session highs. S&P up 1.25%. Every sector higher except for energy. And the Dow also gaining traction here in this final hour. 3.22. Activist investor Carl Icahn setting his sights on grocery giant Kroger. This news just breaking. And we've got some new details for you when we come back. Welcome back to Closing Bell.

Some news just breaking on Kroger this afternoon. The grocery giant saying activist investor Carl Icahn has submitted his concerns regarding animal welfare and the use of gestation crates in pork production. Of course, Scott Wapner has been doing some reporting on the news. He joins me now. What do you know here about what Icahn's up to? So here's the letter that Icahn sent to Kroger dated today. And he has two issues. Number one, he has issues with the CEO pay, which he says is unconscionable, sort of the spread between what the CEO makes and what the median worker makes. And then he takes issue with the same thing he's taking issue with at McDonald's, and that is pork. You mentioned these gestation crates. It's the same sort of issue. He says, I'm going to read a little portion from the letter here. The wage gap between the CEO and the medium worker is unconscionable. Our candidates, he's nominated two people to the

board, by the way. Our candidates will take our concerns about what he calls deplorable animal suffering in these wage gaps at Kroger seriously and add proper oversight. Our concerns regarding Kroger's governance go beyond animal suffering and other terrible practices taking place at industrialized factory farms that he says are supported by Kroger's patronage. I know when we first heard about this story, you're like, well, Kroger doesn't produce pigs. Well, they do. You know, they do support the farms where he has issue with the way that pigs are treated. He cites, as I said, the CEO pay package, while he says was twenty two point four million dollars in 2020. He calls it totally reprehensible that while you managed to personally profit from the extremely high margins caused by the pandemic,

at the same time reneging on your hero hero bonus promise to frontline workers. This is, you know, Kroger, you know, Kroger better than anybody. I don't know the company that well, so I don't know what they promised their workers and what they're not allegedly following through on. So they promised a series of hero pay bonus bumps for frontline workers during COVID. This got a ton of attention at this time because they were the heroes, right, that were working throughout the crisis, as did a lot of the other grocery stores. But then the company came under fire for the profits that it was it was making in the CEO pay and all that. It's sort of largely moved past that. It's been been raising wages for its employees.

I find it interesting that Icon is sort of an ESG investor now, because when it comes to CEO pay and then, you know, going after animal conditions, that's like ESG grab bag. Yeah, he cited with McDonald's in the conversation that we had had on overtime that his daughters work with the Humane Society and that at this stage of his life, he was thinking about different issues, that he wasn't in that to make money. And from what I understand, this is an equally small position in Kroger's as well. So money is not the object here. I'll quote you another part from the letter. It says, not my goal to tell you how to run Kroger operationally, nor make money from my small investment and proxy campaign. I view it as my mission to make changes where I can by doing what I do best in areas that I consider to be glaring injustices. I think it's this stage, this, you know, late stage of his career,

he's focusing in part because he's still very active as an activist that we all know. He's just focused on some different issues. Well, Kroger has been a very well-performing stock. It's up 25%. It's one of the best-performing staples. So as far as agitating for board seats, proxy fight, it might be more challenging. And the other thing I would ask, Scott, is what is McDonald's? They came out with a proxy statement yesterday, and I don't think there's been much traction by Mr. Icahn when it comes to calling for this. So the timing is interesting. It's a small position that he has in McDonald's. There's only so much influence he can exert from

a financial standpoint. And McDonald's, by the way, has pledged to make some changes as well. And Kroger's responding here, too. They said they first heard from Icahn, as I think you read. Friday. Friday, March. Not with Rodney, I can tell you that. Yeah, March, March 25th. And Icahn voiced his concerns.

Then they obviously say that their practices are upstanding, et cetera. But, you know, more to come. Right. If I know anything about Carl about carl icon position size not withstanding he's not going anywhere at least now right he's going to try and exert as much change as he can in the period of time he feels like devoting to this and it's personal right it's a in part motivated by family issues daughter works with the humane society cares about the issue buys a small position and says i'm carl icon you're not and i'm going to try and exert the

change that i can he can make some positive changes because I don't think it goes against anything Kroger's trying to do when it comes to, you know, working with its suppliers to be humane to animals. Yeah. I mean, look, the CEO pay is a whole nother issue. True. And he has issue, as he said, with that. We'll see what happens. He nominated the two people by the deadline to do so. That's why this all comes out now. He had to do it by the deadline, which was just recent. So he did it. Now we see. Look's why this all comes out now. He had to do it by the deadline, which was just recent. So he did it. Now we see. Look forward to more from you in overtime. Scott Wapner joining us on Closing Bell. We'll be right back with the market zone. Robinhood,

by the way, still rallying more than 20 percent. We'll hit that and much more. 15 minutes left in the trading day. We are now in the closing bell market zone. Truist Keith Lerner is here to break down these crucial moments of the trading day. Plus, Jeffrey's Randy Connick on what to watch in Lululemon's earnings coming after the bell. And Evercore CJ Muse on what to expect from Micron's results. Stocks, though, are in the green, rallying in this final hour. Near session highs up one and a quarter percent on the S&P. This even as the bond market flashes a potential recession sign. The 10-year and the two-year Treasury yield spread close to inverting. Keith Lerner, Truist Advisory Services co-chief investment officer. Keith,

is it odd to you that the market is rallying as this Treasury very reliable yield curve recession indicator is flashing red? Yeah, well, first, it's great to be with you, Sarah. It's remarkable that the market's now only down less than 3 percent for the year. And regarding your question, the yield curve matters, but it's not the only thing that matters. And as we've looked at the work, historically, it does not historically has not paid to sell just because we have a yield curve inversion. It does raise the risk. But if you look historically, we've studied seven yield curve inversions. And 12 months later, the market's been up five out of seven times with an average gain of 11%. So again, it matters, Sarah, but there's a lot of other things that matter as well.

Including what the Fed does. And earlier this afternoon, I did speak with the Philadelphia Fed President Patrick Harker about the Fed's plan for rate hikes and the pace of it. I asked him whether he believes there should be a 50 or double basis point hike at the next meeting. Here's what he said about that. Not at this point, but I wouldn't take it off the table. I am a median dot. If you look at the dot plot. So I was in for seven 25 basis point increases. He did say that he thinks the Fed can accomplish what he calls a safe landing, but that there may be bumps along the way. He also weighed in on what he believes is the best way for the Fed to shrink its balance sheet. Listen to this. My view on the balance sheet is

we start on the process of reducing the size and then put it on autopilot, not use that as a tool of monetary policy. It's hard to do policy with two things moving at the same time. So let's put the balance sheet normalization on autopilot, and then we can adjust, if necessary, the Fed funds rate going forward. Keith, how's the market going to take that? Last time Fed Chair Powell said the balance sheet shrinking was on autopilot. Market didn't like it.

Yeah, I think right there it just shows it's complicated. Historically, you know, as we start to tie in policy early on, the markets still tend to rise. But this is one of the reasons why we thought we were going to have more significant corrections, more frequent corrections. And I think this debate of whether the Fed is moving too far or too fast will continue as a whole. So, you know, one thing we look back historically, Sarah, and we said, you know, where has the Fed historically been when they started to first raise rates as far as the unemployment rate and inflation, their dual mandate? And it shows that beyond the curve, right? If you look at the average unemployment rate, it's been 6 percent. Today, we're sub four. And inflation has been only around 2.5 percent when they started to raise rates.

Today it's above 7. So they have a big task in front of them. That transition is going to create a lot of volatility. And that's why even though we still think the primary market trend is higher, the amount of risk we're taking today is less than it would have been a year ago or two years ago in the early part of this market cycle. Got it. Keith, we're going to come back to you before the close, take a look inside the market. But do you want to hit some movers right now? Robinhood, for instance, jumping higher today after the company announced it is adding an additional four hours of extended trading. So the brokerage will now allow clients to trade between 7 a.m. and 8 p.m. Eastern as it tries to

reverse slowing growth. Previously, Robinhood clients could only trade 30 minutes before the market opens and two hours after trading ends on Wall Street. But new hours match what many rivals currently offer. Let's bring in Kate Rooney for more. Kate, why is the market so excited about this? How does it fit in with the broader strategy? Yeah, it's interesting. Robinhood has really had to change its playbook since it went public last summer. The retail trading boom has slowed down, and that has been reflected in the stock. It's had to look to some of the other areas of finance, like banking,

spending products and 401ks. But the important backdrop here and the reason the stock is up so much is that trading and investing really is still Robinhood's bread and butter. So transaction based revenue or payment for order flow makes up about 72 percent of Robinhood's top line. So by expanding the trading hours here, it's expanding the opportunity to make money. And analysts see that as a positive stock getting a boost as a result. And it has been sold off. It's down significantly from from the high last year. And the expansion of trading hours also appears to be in reaction to people just going back to work.

So in a blog post, they really lay this out and explain that dynamic. They say customers are telling Robinhood that they're either working or they're preoccupied during regular market hours. And a lot of these new investors really got into trading while they may have been working from home. So they're sort of trying to accommodate that and letting people either react to market news, just have more time to trade. They also talk about sort of the eventual goal of 24-7

stock trading, which would mirror crypto markets. And as we know, those are open 24-7 on the weekends. And a lot of Robinhood traders, they do both. So stocks and crypto tend to be in the same portfolio. In a lot of cases for Robinhood traders, they may have grown to expect the ability to trade longer hours. So it seems like Robinhood is looking to pivot and accommodate here. But stock up big on that news. Yeah, the meme stop rally this week helps as well, I would think. Kate, thank you very much. Also, just a shout out to Stephen Chuback, the financials analyst at Wolf Research, who this weekend put out his first positive note on Robinhood, said it's a tactical long. Good call

there. Lululemon gearing up to report fourth quarter results after the bell. Shares are rallying today. They're still down about 11 percent this year. Analysts will be watching for progress on the integration of the mirror acquisition still. Plus, any comments about the new footwear line that they launched just last week? With us now is Jeffries retail analyst Randy Connick. Randy, for so long, this was the favorite of analysts like you. Now that Nike has had such a strong quarter and is continuing to grow share, where does Lulu stand? Yeah, look, I think you hit the nail on the head. Everyone knows that Lululemon is going to have a good quarter. They actually pre-announced the quarter at the ICR conference in January. So it

all comes down to what's the outlook and where do we go from here? If you think about Lulu, the growth algorithm expected by the street going into 2022 and beyond, it's over 15% revenue growth. But as you said, Nike's doing a great job of coming back into the marketplace and Nike's Nike. So if you take Nike really on fire, combined with a lot more competition for Lulu, combined with what you just talked about, mirror integration of the acquisition of mirror, integrating that as well as the recent launch of the footwear line, we think that Lululemon has a lot on their plate going into 2022. And we think that that lack of focus or that added items to their plate could dilute their focus and create some issues of execution

as we go into the back part of 2022. That's so interesting, Randy, because a lot of analysts are excited about these new revenue streams and these new products because Lulu has had really good success with product and with resonating with consumers. Just for context, you're on hold with the price target of $340, which is basically where we are right now. Why are you not a believer in that case? Because it's always been, sure, Nike is maybe bigger and more competitive right now, but Lulu has such a high growth rate ahead. It's coming from such a small base internationally and with product lines. Yeah, I think what's interesting for investors to kind of consider is to look at other movies or other stocks that have done things like this before.

A company that comes to mind is Under Armour. If you remember back 10, 15 years ago, Under Armour was all about selling shorts and shirts. And then they went into footwear. And then when they went into footwear, it diluted their focus off of shirts and shorts and so on and so forth or poor apparel. So we think that's a key risk item for Lululemon from here because since its IPO, it's focused on just selling apparel. Now going into footwear and with this mirror acquisition, it's very challenging to say the least. We think that's going to put a lot of issues ahead for Lululemon in terms of being able

to execute upon all these items in 2022, 23 and 24. Skeptical. Randy Connick, thank you for joining us from Jeffries on Lulu. The other mover after the bell will be Micron, which reports shares are up nearly 3% as we head into the close. Let's bring in CJ Mews, Evercore semiconductor analyst. You're expecting CJ a strong quarter, right? A B and a raise and say that the sell-off in this stock has been overdone? Yeah, thanks for having me. You know, stocks underperformed the stocks by 15 points in the last four weeks. And so given our vision for a small beat on the guide, we think that's enough. Obviously, there's fears around the end market consumer and inflationary environment and the impact on PC and smartphone demand. But that's

not it for the company. We think servers, cloud, auto, networking, industrial will make up for that. And we think the second half will continue to grow versus the first half. Supply chain also going to be important. CJ Muse, thank you for your quick take on Micron. Also want to hit energy because it is the only sector in the red dragged down by oil prices, which are lower about a percent right now on Russia and Ukraine talks. Joining us now is Chris Wheaton, Stiefel oil and gas analyst. Which way do prices go with these hopes now of some sort of peace deal and especially with the new developments around the Chinese lockdowns, which have pressured prices?

I think we all have got to hope that the peace talks do go somewhere and that is going to have an effect on oil prices definitely sarah i think in the short run when the market's concerned about further coronavirus impact in china um and also the impact themselves that high oil prices are having but if you think of those impacts as being in a few hundred thousand barrels a day, market's still got to get past the fact that you've probably taken somewhere between two and four million barrels a day of Russian oil exports off the market. And that's a pretty big chunk of missing supply to cope with. So, Chris, ultimately, what do you do with these stocks, which have had already such a strong run up?

If the environment still looks pretty bullish for the companies, the U.S. now asking these producers to get to get back into production mode. But you're still looking at a pretty constructive oil price scenario because you're looking at stocks of both oil and also refined product that are still pretty tight. If you're looking at the refined product market, it's quite clear that the gasoline and diesel prices are going to stay elevated for some period of time. And you're looking at refining margins that are going to probably stay elevated maybe for a period of time, certainly into next year. And that's going to be quite positive for the whole swathe of stocks, particularly if those prices and those refining margins come in. Yeah. What does it do for earnings expectations in the group? And where do you see the biggest dislocations with the prices there?

I think you see focus on things like the refining margins, because I think the market's missing the fact that refining margins for example are going to be quite elevated versus crude benchmarks and I think the market is quite fixated on where the oil price the Brent benchmark is whereas actually there's an awful lot of trading around that at the moment and Brent is less of a benchmark for the global oil industry

than it's been for probably as long as I've been an analyst, you know, 20 years and that's because you're seeing this big dislocation in global industry than it's been for probably as long as I've been an analyst, you know, 20 years. And that's because you're seeing this big dislocation in global trade and you're seeing some countries being able to buy cheap Russian crude and benefit from that. And obviously China and India are two good examples of that as they're still keeping their trade with Russia going. Chris Wheaton, thank you very much. Thank you, Sarah. For joining us with some of your views. Let's get back to the broader market right now, because we are still going strong at 311 here on the Dow as we go into the close.

Keith Lerner rejoins us. Keith, I would also point out the VIX is below 19. Yesterday we did close below 20, so fear coming out of the market as well. I think you mentioned you're still long, but wouldn't necessarily be adding a whole lot to risk. How do you think about this? Is this a technical move based on positioning, or have the fundamentals really changed for you to be a buyer? Well, I think it's a little bit of both. As a technical move, we got way oversold, very negative sentiment, and people were not positioned for this rebound.

In fact, as I speak to clients, everyone's like, why is this market going up? And we're heading into quarter end. So I think we continue to squeeze up over the next few days into quarter end. I will say the fundamentals are strong. The earnings actually this year have continued to rise at a new cycle high. So I think that's a positive. But what I think as we move into the quarter, I think we're more in a range. We're moving towards the upper end of the range with a 20 multiple on the S&P, you know, or near a 20 multiple today. So I still think we're going to be somewhat more range bound and digest some of these recent gains as we head into the next quarter. Keith Lerner, Keith, thank you very much for being with me here into the close. Just want to review where we are. The ARK Innovation Fund right now surging 7%.

Every stock in that ETF is higher right now. A lot of these stocks have a lot of catching up to do. But Robinhood is part of the story there. It's up 23 percent. Some of the biotechs that Cathie Wood likes as well, higher. Again, they've been some of the hardest hit parts of the market. Real estate is your best performing sector right now in the S&P. Every sector, though, is positive except for energy. Technology is number two right there. Remember, we have micron earnings coming after the bell. Consumer discretionary also going strong. Tesla's up another half a percent. It's up 8.6 percent so far for the week. And it's only Tuesday. Still about 12 percent off the recent highs. What else is working right now? Communication services, utilities, staples, industrials, all green. The Dow Jones Industrial Average up almost a full percent right now, more than 300 points. Visa is the

biggest contributor to the gains. Nike also adding about 26 points. Boeing, 35 points to the Dow. The Nasdaq is doing the best with the tech rebound today. Apple up for the 11th day in a row, longest win streak for that company since 2003. Again, coming up to the end of the month of March, and it has been so solid for the stock market. A big surprise as the Fed began hiking interest rates and hinting at more rate hikes to come. And of course, the war in Ukraine. Some hopes of a peace deal, but nothing on the table just yet. There goes the bell.

Near session highs up 1.2% in the S&P 500. That's going to do it for me here on Closing Bell. Have a great evening, everyone. I'll send it into overtime now with Scott Wapner.